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How much money can you make in group counseling practice?

Some time ago I wrote an article titled “How Much Money Can a Counselor Make in Private Practice” that detailed how counselors in solo practice can earn 6 figures a year. To date its been one of my most popular articles and has received hundreds of comments from readers encouraged, and sometimes infuriated, by its contents.

Since “How Much” I’ve wanted to write a follow-up on a much more complicated topic — the earning potential of a group (or agency) counseling practice. While there’s no way to address the entire subject in one column, below I provide some figures and considerations.

A million-dollar practice

While a solo practice is unlikely to ever produce a million dollars of yearly revenue, such revenues are not abnormal for a group practice. Consider the following:

Averaging intake (90791) and ongoing (90834) appointments, counselors bill about $75 a session. A full-time clinician can conduct around 36 sessions per week (at 45 minutes per appointment, that’s 27 hours of face-to-face contact with clients). With 4 weeks off per year, that’s 48 productive weeks and revenues of $131,328. Psychologists bill higher than masters-level counselors, and earn about $95 per session. Using the same metrics, yearly revenues are $164,160.

If your group practice (in-house or online counseling) offers only psychotherapy (without psychological testing, medication management, group therapy, court appearances, or any other ancillary services that could increase revenue) you’ll need 7.7 counselors or 6.0 psychologists to reach $1 million in revenue. This is a substantial, but not unusually large, group practice.

Profit in group Practice

Don’t buy your mansion yet. A million dollars of revenue doesn’t equate a million in profit, and it doesn’t even mean that the company is worth a million dollars. To calculate profitability, we’ll need to subtract operational expenses. The largest expense is the cost of goods — in this case clinician compensation:

Clinician compensation:

Including base compensation and benefits, therapists typically receive 55 to 70 percent of a practice’s total revenue. If you compensate in this range, you’ll have 30 to 45 percent (or $300,000 to $450,000) remaining for operational expenses.

Operational expenses:

There are many operational expenses in running a quality group practice. Here is a typical list, with percent cost ranges:

Credentialing, billing and credit card fees: 7 to 15 percent

Rent and parking: 3 to 7 percent

Reception and scheduling: 3 to 5 percent

Office expenses, supplies and postage: 1 to 3 percent

Admin salaries: 0 to 8 percent

Marketing: 0 to 5 percent (once at capacity)

Research and development: 0 to 3 percent

Clinical supervision and professional development: 0 to 3 percent

Software and electronic medical records: 0 to 3 percent

Accounting, bookkeeping and legal: 0.5 to 1 percent

Travel: 0 to 1 percent

Bank fees: 0 to 1 percent

Phone, internet, electric and gas: 0 to 1 percent

Unemployment, general and professional liability insurance: 0 to 1 percent

Recruiting: 0 to 1 percent

Computers and equipment: 0 to 0.5 percent

Dues and subscriptions: 0 to 0.5 percent

Insurance audits: 0 to 0.5 percent

Meals, entertainment and gifts: 0 to 0.5 percent

Furniture: 0 to 0.5 percent

Maintenance and cleaning: 0 to 0.5 percent

Done! After some simple math you can see that your practice will earn exactly … between -25 to 25% profit (were you hoping I was going to be more specific?).

Results may vary

Financial outcomes vary greatly between group practices.

Some clinicians find that their profit potential managing a group practice or working as a solo clinician is about the same — low six figures. In these cases, the decision to have a solo or group practice may be less a financial one, and more a choice between how one wants to spend their days: in session with clients or managing a small business?

Alternatively, some practice owners find that the only money they actually keep from their group practices are the dollars they themselves make seeing clients and that everything else is break even (or a loss).

On the other hand, other practice owners find that their group practice is highly profitable and, after established, the practice requires little time day-to-day to manage.

Still, other practice owners find that a combination of practice profits and their own clinical hours provides the most return. For example, if your practice earns a 10 percent profit and you also participate as a clinician, your take home compensation could be well over $175,000 per year. Also, with such earnings, your practice might have a market value of several hundred thousand dollars if you were ever to sell.

Getting to black

I mentioned at the beginning that this article would be limited in scope. Clearly, it doesn’t address how challenging it is to recruit 7 counselors and then fill their caseloads. It doesn’t even mention (until now) the $30,000 to $100,000 one can spend launching a practice.

In addition, getting to profitability can be challenging. The profitability of a $1,000,000 per year revenue practice will be different from a $600,000 per year practice. This is because some operational expenses are fixed, or don’t scale at a 1-to-1 ratio. For example, both practices may need a fulltime receptionist at $30,000 a year — that’s 3 or 5 percent, respectively. Moreover, if one has an office suite that can handle $1,000,000 in business, but the office is only billing $600,000, a 5 percent expense at capacity will balloon to over 8 percent.

I’ve found building practices to be a challenging but also rewarding endeavor — but it’s not for everyone. Hopefully this column offered some guidance if you’re considering graduating from a solo to a group private practice.

Anthony Centore, Ph.D., is private practice consultant for the ACA, founder of Thriveworks Counseling (with locations in 9 states), and author of the book, How to Thrive in Counseling Private Practice. Anthony is a licensed counselor in Massachusetts and Virginia. Find him on Twitter at @anthonycentore or @Thriveworks.